[Code of Federal Regulations]
[Title 26, Volume 11]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1382-7]

[Page 775-776]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Tax Treatment of Cooperatives--Table of Contents
 
Sec. 1.1382-7  Special rules applicable to cooperative associations exempt from tax before January 1, 1952.

    (a) Basis of property. The adjustments to the cost or other basis 
provided in sections 1011 and 1016 and the regulations thereunder, are 
applicable for the entire period since the acquisition of the property. 
Thus, proper adjustment to basis must be made under section 1016 for 
depreciation, obsolescence, amortization, and depletion for all taxable 
years beginning prior to January 1, 1952, although the cooperative 
association was exempt from tax under section 521 or corresponding 
provisions of prior law for such years. However, no adjustment for 
percentage or discovery depletion is to be made for any year during 
which the association was exempt from tax. If a cooperative association 
has made a proper election in accordance with section 1020 and the 
regulations prescribed thereunder with respect to a taxable year 
beginning before 1952 in which the association was not exempt from tax, 
the adjustment to basis for depreciation for such years shall be limited 
in accordance with the provisions of section 1016(a)(2).
    (b) Amortization of bond premium. In the case of tax exempt and 
partially taxable bonds purchased at a premium and subject to 
amortization under section 171, proper adjustment to basis must be made 
to reflect amortization with respect to such premium from the date of 
acquisition of the bond. (For principles governing the method of 
computation, see the example in paragraph (b) of Sec. 1.1016-9, relating 
to mutual savings banks, building and loan associations, and cooperative 
banks.) The basis of a fully taxable bond purchased at a premium shall 
be adjusted from the date of the election to amortize such premium in 
accordance with the provisions of section 171 except that no adjustment 
shall be allowable for such portion of the premium attributable to the 
period prior to the election.
    (c) Amortization of mortgage premium. In the case of a mortgage 
acquired at a premium where the principal of such mortgage is payable in 
installments, adjustments to the basis for the premium must be made for 
all taxable years (whether or not the association

[[Page 776]]

was exempt from tax under section 521 during such years) in which 
installment payments are received. Such adjustments may be made on an 
individual mortgage basis or on a composite basis by reference to the 
average period of payments of the mortgage loans of such association. 
For the purpose of this adjustment, the term premium includes the excess 
of the acquisition value of the mortgage over its maturity value. The 
acquisition value of the mortgage is the cost including buying 
commissions, attorneys' fees, or brokerage fees, but such value does not 
include amounts paid for accrued interest.

[T.D. 6643, 28 FR 3156, Apr. 2, 1963]